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AMEYA NARVEKAR
Citi is organized into two major segments – Citicorp and Citi Holdings.9495 Citicorp contains two core businesses, i.e. Global Consumer Banking96 and Institutional Clients Group,97 while Citi Holdings contains Citi's non-core businesses, i.e. Brokerage and Asset Management (formerly includes Smith Barney), Global Consumer Finance, and Citi's Special Asset Portfolios.98 Consumer bankingedit Citibank (Retail Banking)edit Retail banking encompasses Citi's global branch network, branded Citibank. Citibank has more than 4,600 branches in the world and holds more than $300 billion deposits. Citibank is the fourth largest retail bank in the United States (Wells Fargo gained #3 spot in early 2016) based on deposits, and it has Citibank branded branches in countries throughout the world, with the exception of Mexico which is under a separate subsidiary called Banamex. Banamex, which serves about 20 million clients, is Mexico's largest local financial institution as measured by assets. Citibank offers Citibank/Citigold Checking and Savings accounts, Small Business and Commercial Banking and Personal Wealth Management among its services. In 2011, Citi is the first bank to introduce digitized Smart Banking branches in Washington, D.C., New York, Tokyo and Busan (South Korea) while continued renovating its entire branch network.99100 New sales and service centers were also opened in Moscow and St. Petersburg. Citi Express modules, 24-hour service units, were introduced in Colombia. Citi recently opened new branches in three new cities in China as part of its plan to expand Citi's presence in People's Republic of China to 13 cities. Additionally, Citibank offers Citigold services world-wide to mass affluent clients with at least $50,000 USD in liquid assets. In certain markets, Citigold Select is available for clients with at least $500,000 in liquid assets.101 Its highest tiered service, Citigold Private Client, is for high-net-worth individuals with at least $1–$3 million in liquid assets (depending on the market region) and offers access to investments and ideas from Citi Private Bank.102103104105106 Citi Branded Cardsedit Citi Branded Cards is one of the world's largest credit card issuers. Citi Branded Cards is responsible for around 40% of the profits with GCB, and represents the largest issuer of credit cards across the world as well as a 3,800-point ATM network across 45 countries. Citi Branded Cards introduced several new products in 2011, including: Citi ThankYou, Citi Executive/AAdvantage and Citi Simplicity cards in the U.S.. It also has Latin America partnership cards with Colombia-based airline Avianca and with Banamex and AeroMexico; and a merchant loyalty program in Europe. Citibank is also the first and currently the only international bank to be approved by Chinese regulators to issue credit cards under its own brand without cooperating with Chinese state-owned domestic banks.107 Citi Retail Servicesedit Citi Retail Services moved from Citi Holdings to become part of GCB in 2012 after expanding several existing partnerships with retail clients, and re-branding to reflect the suite of services offered to partners.108 It is one of the largest providers of consumer and commercial credit card products, services, and retail solutions in the U.S.109 Citi Commercial Bankedit Commercial Banking at Citi serves 100,000 small to medium-size companies in 32 countries.110 CitiMortgageedit CitiMortgage services real estate mortgages.111112 Institutional Clients Groupedit Citi's Institutional Clients Group (ICG) offers investment and corporate banking services and products for corporates, governments, institutions, and ultra high-net-worth investors. Containing Citi's most market-sensitive divisions, ICG consists of five main divisions: Citi Capital Markets Origination, Citi Markets & Securities Services (including Citi Research), Citi Corporate & Investment Banking, Citi Private Bank, and Citi Treasury and Trade Solutions. Citi Capital Markets Originationedit Citi's Capital Markets Origination business is focused on the capital-raising needs for institutional clients. It is a spin-off of its former Citi Markets division. Citi Markets & Securities Servicesedit Former Transactions Service unit, Securities Funds Services, was merged with Citi Markets to form Citi Markets & Securities Services. The current unit includes Investor Services and Direct Custody and Clearing, Hedge and Private Equity Servicing, and Issuer businesses. It provides financial products through underwriting, sales & trading of a range of investment assets. Products offered include equities, commodities, credit, futures, foreign exchange (FX), emerging markets, G10 rates, municipals, prime finance/brokerage services, and securitized markets, such as collateralized debt obligations and mortgage-backed securities.113 Its Citi Research team provides equity and fixed income research, company, sector, economic and geographic market analysis, and product-specific analysis for Citi's individual and institutional clients. Its flagship research reports include the following: Portfolio Strategist, Bond Market Roundup, U.S. Economics Weekly, International Market Roundup, Global Economic Outlook & Strategy and the Global Equity Strategist.114 Citi Corporate & Investment Bankingedit Citi Corporate & Investment Banking provides strategic and financing products and advisory services to multinational and local corporations, financial institutions, governments, and privately held businesses in more than 160 countries. Moreover, it includes client services such as Mergers & Acquisitions activities as well as Initial Public Offerings. Citi Corporate & Investment Banking won several awards in 2011, including International Financing Review's Best Americas Securitization for Ford Credit, Best Emerging Asia Bond for Pertamina, Best Latin America Bond for Petrobras, Best Emerging EMEA Bond for VimpelCom, Best Yen Bond for Panasonic, Best Senior Financial Bond for Capital One and Best Americas Structure Equity Issue for AIB/MetLife.115 Citi Private Bankedit A Citi Private Bank Office Citi Private Bank is an advisor to ultra high-net-worth individuals and families throughout the world. It uses an open architecture network of more than 800 private bankers and investment professionals across 46 countries and jurisdictions to provide clients access to global investment opportunities. It has about $250 billion in assets under management. The minimum net worth requirement is $25 million in liquid assets and is waived for only law firm groups and other clients under special circumstances.116 Formerly part of Global Wealth Management, Citi Private Bank was merged into Citi's Institutional Clients Group. Unlike many of its competitors, since 2009 Citi Private Bank no longer pays its bankers with commission for selling investment products. Former CEO of Citi Private Bank, Jane Fraser, said the move was meant to bolster Citi Private Bank as an independent wealth management adviser, as opposed to a product pusher.117118 Citi Treasury and Trade Solutionsedit Citi Treasury and Trade Solutions (TTS) 119 provides cash management, trade and securities services to companies, governments, and other institutions in the U.S. and more than 140 countries. TTS intermediates more than $3 trillion in global transactions daily. It has over $13 trillion assets under custody, about $377 billion in average liability balances, serves 99% of world's Fortune 100 companies and ~85% of the world's Fortune 500 companies, and has 10 regional processing centers worldwide using global processes. Institutions use TTS to support their treasury operations with global solutions for payments, collections, liquidity and investments by working in partnership with export credit agencies and development banks. It also sells supply chain financing products as well as medium- and long-term global financing programs across multiple industries. In 2011, clients doing business with Citi in 10 or more countries generated more than 60 percent of Transaction Services' total revenues. According to the Wall Street Journal, the government aid provided to Citi in 2008/2009 was provided to prevent a world-wide chaos and panic by the potential collapse of its Global Transactions Services (now TTS) division. According to the article, former CEO Pandit said if Citigroup was allowed to unravel into bankruptcy, "100 governments around the world would be trying to figure out how to pay their employees".120121122123124 Citi Holdingsedit Citi Holdings consists of Citi businesses that Citi wants to sell and are not considered part of Citi's core businesses. The majority of its assets are U.S. mortgages. It was created in the wake of the financial crisis as part of Citi's restructuring plan. It consists of several business entities including remaining interests in local consumer lending such as OneMain Financial, divestitures such as Smith Barney, and a special asset pool. Citi Holdings represents $156 billion of GAAP assets, or ~8% of Citigroup; 59% represents North American mortgages, 18% operating businesses, 13% special asset pool, and 10% categorized as other. Operating businesses include OneMain Financial ($10B), PrimeRe ($7B), MSSB JV ($8B) and Spain / Greece retail ($4B), less associated loan loss reserves. While Citi Holdings is a mixed bag, its primary objective is to wind down some non-core businesses and reduce assets, and strategically "breaking even" in 2015.125 Spin-offsedit Downsizing of consumer banking unitedit In October 2014, Citigroup announced it will exit consumer banking in 11 markets, including Costa Rica, El Salvador, Guatemala, Nicaragua, Panama, Peru, Japan, Guam, the Czech Republic, Egypt, South Korea (consumer finance only), and Hungary.126 Morgan Stanley Smith Barneyedit Morgan Stanley Smith Barney was previously Citi Smith Barney, Citi's global private wealth management unit, providing brokerage, investment banking and asset management services to corporations, governments and individuals around the world. With over 800 offices worldwide, Smith Barney held 9.6 million domestic client accounts, representing $1.562 trillion in client assets worldwide.127 Citi announced on January 13, 2009 that they would give Smith Barney to Morgan Stanley investment bank to combine their brokerage firms in exchange for $2.7 billion and 49% interest in the joint venture.128129 The remaining 49% stake of Smith Barney owned by Citi was later sold for $13.5 billion following an appraisal by Perella Weinberg.130 Napier Park Global Capitaledit Citi Capital Advisors (CCA),131 formerly Citi Alternative Investments, was a Citi Hedge fund that offers various investment strategies across multiple asset classes, ranging from market strategies to infrastructure and private equity investing for institutional and high-net-worth investors. Due to US regulations as part of the Volcker rule to limit bank ownership in hedge funds to no more than 3%, Citi spun off its hedge fund unit with its managers owning a significant part of the new company.132 The spin-off of CCA created Napier Park Global Capital, a $6.8 billion hedge fund with more than 100 employees in New York and London. The new company will be managed by Jim O’Brien and Jonathan Dorfman, who would serve as co-CEOs and were former Citi executives managing CCA. Citigroup will continue to retain a sizable minority position in the new firm, but will slowly withdraw its capital over time by the July 2014 deadline stipulated by the Volcker Rule.133134135136 OneMain Financialedit In March, 2015, Springleaf Financial entered into an agreement to acquire OneMain Financial from Citigroup.137 Real estateedit Citigroup Center, Chicago Citigroup EMEA headquarters, Canary Wharf, London Citigroup Centre in Sydney Citigroup's most famous office building is the Citigroup Center, a diagonal-roof skyscraper located in East Midtown, Manhattan, New York City, which despite popular belief is not the company's headquarters building. Citigroup has its headquarters across the street in an anonymous-looking building at 399 Park Avenue (the site of the original location of the City National Bank).138 The headquarters is outfitted with nine luxury dining rooms, with a team of private chefs preparing a different menu each day. The management team is on the second and third floors above a Citibank branch. Citigroup also leases a building in Tribeca at 388 Greenwich Street that serves as headquarters for its Investment and Corporate Banking operations and was the former headquarters of the Travelers Group.139 All of Citigroup's New York City real estate, excluding the company's Smith Barney division and Wall Street trading division, lies along the New York City Subway's IND Queens Boulevard Line, served by the E M trains. Consequently, the company's Midtown buildings—including 787 Seventh Avenue, 666 Fifth Avenue, 399 Park Avenue, 485 Lexington, 153 East 53rd Street (Citigroup Center) in Manhattan, and Citigroup Building in Long Island City, Queens, are all on the short four-stop corridor of the Queens Boulevard Line between Court Square and Seventh Avenue.140 Chicago also plays home to a building operated by Citigroup. Citicorp Center has a series of curved archways at its peak, and sits across the street from major competitor ABN AMRO's ABN AMRO Plaza. It has shops and restaurants serving Metra customers via the Ogilvie Transportation Center.141 Citigroup has obtained naming rights to Citi Field, the home ballpark of the New York Mets Major League Baseball team, who began playing their home games there in 2009.142 Regulatory action, lawsuits, and arbitrationedit In 2004, Japanese regulators took action against Citibank Japan loaning to a customer involved in stock manipulation. The regulator suspended bank activities in one branch and three offices, and restricted their consumer banking division. In 2009, Japanese regulators again took action against Citibank Japan, because the bank had not set up an effective money laundering monitoring system. The regulators suspended sales operations within Citibank's retail banking for a month.143 On March 23, 2005, the National Association of Securities Dealers, the former name of the American self-regulatory organization for broker-dealers, now known as the Financial Industry Regulatory Authority (FInRA) announced total fines of $21.25 million against Citigroup Global Markets, Inc., American Express Financial Advisors and Chase Investment Services regarding suitability and supervisory violations of their mutual fund sales practices between January 2002 and July 2003. The case against Citigroup involved recommendations and sales of Class B and Class C shares of mutual funds.144 On June 6, 2007, FInRA announced more than $15 million in fines and restitution against Citigroup Global Markets, Inc., to settle charges related to misleading documents and inadequate disclosure in retirement seminars and meetings for BellSouth Corp. employees in North Carolina and South Carolina. FInRA found that Citigroup did not properly supervise a team of brokers located in Charlotte, N.C., who used misleading sales materials during dozens of seminars and meetings for hundreds of BellSouth employees.145 In July 2010, Citigroup agreed to pay $75 million to settle civil charges that it misled investors over potential losses from high-risk mortgages. The Securities and Exchange Commission said that Citigroup had made misleading statements about the company's exposure to subprime mortgages. In 2007, Citigroup indicated that their exposure was less than $13 billion, when in fact it was over $50 billion.146 In April 2011, an arbitration panel ordered Citigroup Inc to pay $54.1 million for losses from municipal securities funds that cratered between 2007 and 2008.147 In August 2012, Citigroup agreed to pay almost $25 million to settle an investor lawsuit alleging the bank misled investors about the nature of mortgage-backed securities. The lawsuit was on behalf of investors who purchased certificates in one of two mortgage-backed securities trusts from Citigroup Mortgage Loan Trust Inc in 2007.148 In February 2012, Citigroup agreed to pay $158.3 million to settle claims that it falsely certified the quality of loans issued by its CitiMortgage unit over a period of more than six years, so that they would qualify for insurance from the Federal Housing Administration. The lawsuit was initially brought by Sherry Hunt, a CitiMortgage employee.149150 On February 9, 2012, it was announced that the five largest mortgage servicers (Ally/GMAC, Bank of America, Citi, JPMorgan Chase, and Wells Fargo) agreed to a historic settlement with the federal government and 49 states.151 The settlement, known as the National Mortgage Settlement (NMS), required the servicers to provide about $26 billion in relief to distressed homeowners and in direct payments to the states and federal government. This settlement amount makes the NMS the second largest civil settlement in U.S. history, only trailing the Tobacco Master Settlement Agreement.152 The five banks were also required to comply with 305 new mortgage servicing standards. Oklahoma held out and agreed to settle with the banks separately. In 2014, Citigroup agreed to pay $7 billion to resolve claims it misled investors about shoddy mortgage-backed securities in the run-up to the financial crisis. Attorney General Eric H. Holder Jr. said "The bank’s misconduct was egregious. ... As a result of their assurances that toxic financial products were sound, Citigroup was able to expand its market share and increase profits" and that "the settlement did not absolve the bank or its employees from facing criminal charges."153 In July 2015, Citigroup was fined $70 million by the United States Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency, and ordered to pay $700 million to customers. Citigroup had conducted illegal practices in marketing add-on products for credit cards, including credit monitoring, debt-protection products and wallet-protection services.154 Enron, WorldCom, and Global Crossing bankruptciesedit On October 22, 2001, Citigroup was sued for violating federal securities laws by misrepresenting Citigroup's Enron-related exposure in its 2001 Annual Report and elsewhere, and failing to disclose the true extent of Citigroup's legal liability arising out of its 'structured finance' deals with Enron.155 In 2003, Citigroup paid $145 million in fines and penalties to settle claims by the Securities and Exchange Commission and the Manhattan district attorney's office.156 In 2004, Citigroup paid $2.65 billion to settle a lawsuit concerning their role in selling stocks and bonds for WorldCom, the second largest telecommunications company in the world, inflating the earnings for 2001 and the first quarter of 2002,157 and paid $2.575 billion for settlement, which collapsed in 2002 in an accounting scandal.158159 In 2005, Citigroup paid $75 million to settle a lawsuit from investors in Global Crossing, which filed bankruptcy in 2002.160 Citigroup was accused of issuing exaggerated research reports and not disclosing conflicts of interest.161 On February 5, 2002, Citigroup Inc had a lawsuit for violating federal securities laws and misled investors by issuing false information about Global Crossing’s and Asia Global Crossing’s revenues and financial performance,162 and paid $75 million for settlement. In 2005, Citigroup paid $2 billion to settle a lawsuit filed by investors in Enron.163164 On November 8, 2007, Citigroup was sued manipulating and inflating its stock price by misrepresentations and omissions of what amounted to more than two years of income and an entire line of business,165 and paid $590 million for settlement. Class action service companies like Chicago Clearing Corporation helped many financial institutions, like hedge funds, mutual funds, and bank trust, regain this money after holding what appeared to be a seemingly safe investment.needed In 2008, Citigroup paid $1.66 billion to the Enron Bankruptcy Estate, which represented creditors of the bankrupt company.166167 In 2008, Citigroup paid out over $3 billion in fines and legal settlements for their role in financing Enron Corporation, which collapsed amid a financial scandal in 2001.[